Each organisation strives towards building an effective performance management process for business success. A process which encourages employees to take ownership in driving overall organizational performance focuses on 3 major deliverables:
- Translating strategic Business Objectives and Initiatives into Individual Performance Objectives and Action Plan.
- Facilitating individual & thereby business performance through continuous event based feedback, periodic reviews and proactive performance coaching.
- Driving culture of High Performance by analysing data on performance for employee rewards & recognition.
Here are 5 Performance Management Tools that organisations can adopt to achieve these deliverables:
Balanced Scorecard finds its origins in a multi-company study called “Measuring Performance in the Organization of the Future”, conducted in 1990 by Nolan Norton Institute. Kaplan and Norton, the developers of Balanced Scorecard, found in their research that fewer than 10 per cent of all strategies are implemented well, and this can be traced to fundamental problems in the process of strategic implementation:
- The vision barrier – Only 5 per cent of the workforce understands the strategy.
- The resource barrier – 60 per cent of organizations do not link budgets to strategy.
- The management barrier – 85 per cent of executive teams spend less than one hour per month discussing strategy.
- The people barrier – Only 25 per cent of managers have incentives linked to strategy.
The Balanced Scorecard system is designed to overcome these barriers through the translation of strategy into measurable objectives, organization-wide understanding of the strategy, resource allocation to support the strategy, and learning about strategy.
Unlike a pure financial focus which leaves a gap between the organization’s strategic direction and its implementation BSC covers four Perspectives balancing between short and long term objectives, lead and lag indicators (outcome measures are lag indicators (Profits, costs), performance driver measures are lead indicators (leads generated, capability built).
Well defined balanced scorecards at organisation, departmental, team and individual levels depict a clear cause and effect linkage between how each individual goal impacts the overall organisation goal. Whenever I have implemented the detailed Balanced Scorecard process in an organisation, employees have come back to us saying that they now understand completely how their role is adding value to the overall strategy.
2- Action Planning
While this is an integral part of creating a good balanced scorecard but it is often missed. Most balanced scorecards have well defined objectives or goals in Financial, Customer, Internal Process, Learning & Growth perspectives. Each goal has a unit of measurement, targets and weight. As a next step to effective goal setting is to define action plans for each goal. These are a list of initiatives to be taken to achieve that goal. It is also important to define budgets needed for these initiatives, budgeting therefore gets linked directly to driving organisation strategy as compared to incremental amounts over previous years.
I have personally experienced that this step helps simplify the complex goals into small easily understandable and achievable actions that employee understand well and are confident to drive removing the VISION BARRIER that we discussed earlier.
3- SMART Business Reviews Using Technology
Once an organisation have a good balanced scorecard and well defined action plans, each organisation should plan monthly business reviews focussing on actions that needed completion in that month and results achieved from those action completions. These reviews need to be held at Business, Departmental, Team and Individual levels to take a stock of progress made.
Organisations that have online performance management systems should capture these reviews online. Most smart modern suites like Success Factors already have a built in continuous performance review mechanism.
These reviews should focus on completion of Initiatives in the action plan, this enables managers to clearly measure the efforts put by employees in achieving their goals, while reviewing financial results and tweaking action plans on the go.
A good balanced scorecard should have action plans, budget and review of achievements section
4-Robust Incentive Plan to Reward Performance
Once the goals are cascaded to all levels, action planning for each goal is complete and review mechanism is established, its time to link incentives to drive performance excellence. Incentives need to be directly linked to scorecards/goals and should be based on measurable results. Incentives are also a great mechanism to share positive results and foster collaboration. Short term incentives could be calculated quarterly and should be based on Individual, departmental and business scores.
In one of my organisations, we created an app that displayed monthly scores on Individual, Departmental and Business scorecards. Employees were able to calculate and project their incentives themselves. They also understood interdependencies between departments and helped each other out to improve departmental and business scores. This linkage helped us in ensuring that employees do not work in silos and focus both on individual and organisational goals.
This also helped us in removing the bell curve process as employee scores were objective, and budget allocations for incentives plus increments was linked to business and departmental performance.
5-Minutely Planned Recognition Program
Effective performance cannot be driven without regular appreciation of positive steps and results. We need to appreciate what we want to see more of. Many times employee recognition efforts are sporadic seen only as good to have. On the contrary a well-planned recognition program can do wonders to business performance. Monthly awards for highest score on a performance parameter, sharing the stories of top performing employees and teams each month energise the entire organisation and leave a lasting impression on minds of employees.
I remember interviewing over 100 medical representatives as a summer Intern at GSK, for planning their incentive program. An appreciative inquiry with them revealed that the monetary incentives are soon forgotten or seen as a part of regular earnings. What high performers remembered is the award they were given by a senior leader, the experience to having been called at a leadership meet, the opportunity to share their success story across the organisation. This has been my experience in every organisation across industries and performance cycles year on year.
Smart Recognition programs not only act as effective tools for boosting self-esteem of high performers, but also put the organisation on an exponential learning curve through continuous knowledge sharing.
To conclude I would like to say that effective performance management should follow the principles of the Vroom theory of expectation: The theory suggests that although individuals may have different sets of goals, they can be motivated if they believe that:
- There is a positive correlation between efforts and performance,
- Favourable performance will result in a desirable reward,
- The reward will satisfy a need that is important to them
Vroom suggests that an employee’s belief about Expectancy, Instrumentality, and Valence interact psychologically to create a motivational force such that the employee puts discretionary efforts towards their performance goals. Great goal setting, Detailed Action Planning, Smart reviews, Simple regular Incentives and a well-planned recognition program are my recommendations to each organisation to drive effective performance. I am looking forward to learning and hearing from you which tools are working for you.